Markets Slide Lower on Disappointing Economic Data
The Dow Jones Industrial Average closed the day down 36 points, or 0.24%, and now sits at 15,512 while the S&P 500 and the Nasdaq also slide lower. The tech-heavy index lost 0.39% while the S&P 500 gave back 0.37% of its value during today's session. The main catalyst for the markets' decline was the disappointing pending home sales report from the National Association of Realtors. June's pending homes sales or the number of contracts signed to purchase an existing home in June declined 0.4% from May's results when the number hit a six year-high. Despite the slight decline, June's homes sales number was still more than 105 higher than were it was in June of 2012, but everyone is now concerned that May's sudden interest rate jump has scared off potential buyers and that the housing industry may see slower growth in the coming months.
Now let's take a look at a few of today's big Dow losers.
Shares of Microsoft were downgraded this morning by Atlantic Equities from overweigh to neutral. The stock fell 0.25% today on the news as the price target was also lowered from $35 per share to $33. The firm stated that structural headwinds are greater than what had previously been expected. The discounts now being offered for Windows and slow growth in the server business caused the firm to make the downgrade. Although the stock did decline more than 10% just a few weeks ago, shares are still up 18.08% year to date and that's not including the 2.9% dividend yield while the Dow is up 18.45% over the same time frame. Investors should sit tight while the future of the PC plays out and see if the company can gain any ground in the mobile arena.
Another big technology stock declining today was Hewlett-Packard . The stock lost 1.23%, which could be the result of the downgrade to Microsoft and an article in the The New York Times this weekend, as my colleague John Divine pointed out earlier today. The article highlights the effects the rise of tablet computers is having on the PC industry. It is expected that while 300 million PCs will be shipped this year, 200 tablets will also move out of manufacturers' warehouses. Analysts believe that PCs are still being used on a daily basis as the workhorse, but that the purchase of tablets is causing consumers to postpone buying new PCs. But having said that, most strongly believe that the inevitable refresh cycle will eventually happen.
As a whole, the energy sector slid lower today, while Chevron dropped 1.09% and ExxonMobil declined 0.8%. The decline came as crude prices hardly fell, but natural gas moved lower by 2.55%. Last week's U.S. crude oil inventory report has caused traders some concern as inventories fell; the price of oil also moved lower, which doesn't follow standard supply and demand theories. Furthermore, both Chevron and Exxon are scheduled to report earnings later in the week, so that could be playing on investors' minds as the price of oil highly affects the company's earnings per share. As earnings are released, investors should be watching each company's inventories and what each expects on the production side in the coming months as that will likely also affect the price of oil and earnings down the road.
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Fool contributor Matt Thalman owns shares of Microsoft. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Chevron and wns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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